Herbst Kinsky Rechtsanwälte GmbH

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

All lawsuits between employers and employees arising from employment and disputes resulting from collective labour law have to be brought before specialized Labour and Social Courts (Arbeits- und Sozialgerichte). The competent courts of first instance are the regional courts (Landesgericht), which each act as a Labour and Social Court along with their other areas of jurisdiction (with the sole exception of Vienna, which has a special Labour and Social Court). Labour and Social Courts hear cases and reach a decision in panels, with a professional judge as chairman, one associate judge with employer status and one of employee status. The lay judges are appointed on the recommendation of the statutory representatives of the employer and the employee. They do not receive remuneration for their activities, only the payment of expenses. Appeals against decisions of the first instance, Labour and Social Court are heard by a special section of one of the four regional courts of appeal (Oberlandesgerichte). Appeals against their decisions are heard by a special section of the Supreme Court (Oberster Gerichtshof). The appeal court consists in both instances of three professional judges and two lay-judges.


The Main Sources Of Employment Law

The main sources of Employment Law are the Labour Code and supplementary statutes, European Law, Collective Bargaining Agreements (Kollektivverträge), Shop Agreements (Betriebsvereinbarungen), Company Rules, individual employment contracts and court decisions.


National Law And Employees Working For Foreign Companies

Austrian law applies, if the employment agreement provides for the application of Austrian law (Article 3 and Article 8 para 1 of the Rome I Regulation). According to Article 9 of the Rome I Regulation Austrian Public Policy Rules apply. Overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under this regulation (Eingriffsnormen).

If there is no applicable law agreed upon in the contract, Austrian law applies provided work is executed in Austria (Article 8 para 2 of the Rome I Regulation).


National Law And Employees Of National Companies Working In Another Jurisdiction

The parties to the employment contract are free to maintain the application of Austrian law to employees of an Austrian company working in another jurisdiction (Article 3 and Article 8 para 1 of the Rome I Regulation). If there is no applicable law agreed upon in the contract, the law governing the contract will usually be that of the usual place of work (Article 8 para 2 of the Rome I regulation).


Data privacy

The General Data Protection Regulation (Regulation (EU) 2016/679) (GDPR) is a European Union law which entered into force in 2016 and, following a two-year transition period, became directly applicable law in all Member States of the European Union on May 25, 2018, without requiring implementation by the EU Member States through national law. The GDPR comprises rules on the processing of personal data, such as the principles of processing, the rights of the data subjects and the responsibilities of the controllers and processors. In addition to the GDPR, the Data Protection Act (Datenschutzgesetz) is the central piece of legislation in Austria regulating data privacy. In accordance with the aforementioned Act, every (automated) collection, processing, or use of personal data must either be permitted by law or covered by the consent of the works council or in case that there is no works council by the consent of each person involved.

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

As in civil law, freedom of form is basic to employment contract law. Therefore, no special form is required for employment contracts. They can be concluded verbally, in writing or by conclusive negotiation. However, the contracting parties can indeed agree on the use of a particular form in which case, in the event of a dispute, it will be presumed that the agreed form is a condition of validity.

Nevertheless, the contracting parties can also depart from the agreed form by arrangement.

In exceptional cases, the law specifies written form, but usually only for certain sorts of agreements, for instance for apprentices or for an agreement by which employee inventions belong to the employer.

Although Austrian law does not provide for a specific form of the contract of employment, the employer has to provide the employee immediately after commencement of the employment relationship with a written statement outlining the essential rights and obligations arising from the contract of the employer, the so-called "written statement of terms of employment" (Dienstzettel). Such written statements do not have to be provided, if a written contract has been drawn up or if the employment relationship lasts not longer than one month. Such written statements have to contain the information required by law (see Section 2 Austrian Act on the Adjustments of Labour Law (Arbeitsvertragsrechtsanpassungsgesetz – AVRAG).


Mandatory Requirements
  • Trial Period

    • Austrian labour law permits agreements providing for a trial period under which either party may terminate the contract at will without respecting any notice period. Provisions for trial periods are valid only to the extent that trial period does not exceed one month (Section 19 para 2 Austrian Employment Act (Angestelltengesetz - AngG) . Trial periods must explicitly be agreed upon. Contracts providing for a longer probation period are considered as fixed-term employments ending at the end of the probation period. One way to "circumvent" the regulation that trial periods may only be agreed upon for the period of one month is to conclude employment agreements for a fixed period of time (e.g. six months).

  • Hours Of Work

    • The provisions governing working hours are laid down in the Working Time Act (Arbeitszeitgesetz - AZG), the Hours of Rest Act (Arbeitsruhegesetz - ARG) and the respective provisions of other collective bargaining agreements. Working hours are defined as the time between the beginning and the end of work, not including resting periods. In general, working hours must not exceed eight hours a day, the normal weekly working time must not exceed 40 hours. In specific cases, if the working hours are distributed differently over the week, daily working hours may be extended. In any case, the maximum number of working hours must not exceed twelve hours a day, weekly working hours must not exceed 60 hours (subject to some very limited and specific exceptions).

  • Special Rules For Part-time Work

    • Part-time employees must not be treated worse than full-time employees on grounds of the part-time employment. Some collective bargaining agreements obtain specific rules for part-time work. Most of these provisions are concerning their salary. According to the Austrian Working Time Act (Arbeitszeitgesetz), part-time employees are entitled to receive a 25 % overtime premium (Mehrarbeitszuschlag).

  • Earnings

    • If employees benefit from Collective Bargaining Agreements which stipulate minimum salaries, those employees may not be paid less than this prescribed minimum, even if the employee would accept a lower salary.

  • Holidays/Rest Periods

    • Paid Vacation:

    Under the Austrian Vacation Act (Urlaubsgesetz - UrlG) , which applies to virtually all employees in the private sector, an employee is entitled to paid vacation for each actual year of service. For a period of service of less than 25 years the vacation amounts 30 working days per year. Please note that Saturdays are being counted as working days. After more than 25 years of service, the annual vacation is 36 working days. For the calculation of vacation entitlement, the time spent with previous employers as well as periods of self-employment are taken into account, but only up to a maximum of five years.

    The scheduling of vacation must be agreed upon between the employer and employee, taking into consideration both the business needs and practical considerations of the enterprise as well as the employees' possibilities for recreation. Thus, the employer may not unilaterally determine vacation times, nor may the employee unilaterally consume vacation.

    Annual State Holidays:

    According to section 1 of the Public Holiday Rest Act (Feiertagsruhegesetz) 12 days are considered as state holidays.

    Rest periods:

    If the period of work exceeds 6 hours, the employee is entitled to a half-hour daily rest period. Moreover, between the end of the work and the beginning of the work on the next day must be at least 11 hours of rest. Further, the employees are entitled to a 36 hours rest period per week. In addition, various detailed rules concerning daily rest periods as well as weekly rest periods have to be observed.

  • Minimum/Maximum Age

    • Except for very few exceptions (for example children who act in a film or in a theatre play) the minimum age for employees is 14. Special protective provisions apply for minors. The general (theoretical) age for retirement is 65 for male employees and 60 for female employees. However, in the next years, the retirement age for female will gradually align.

  • Illness/Disability

    • If an employee is prevented from working as agreed by illness or accident, he in principle retains his right to receive wage or salary payment for a certain period. There is no protection against losing a job because of illness. An employer can also give notice during the illness. The length of the period during which wages are continued to be paid depends on the length of employment with the same employer. Employees with up to one year of service have a right to be paid for 6 weeks; up to 15 years, payment continues for 8 weeks; from 15 years of service, the period is 10 weeks, and it increases to 12 weeks after 25 years of service. Furthermore, there is an additional right to the payment of half the wage for a further 4 weeks in all cases. The employees are obliged by statue to inform their employer without delay of their incapacity to work. At the employer’s request, an employee must also provide a doctor’s certificate stating the cause and length of the incapacity to work. If an employee does not fulfil these conditions, he loses his right to continued wage payment so long as he is in default.

  • Location Of Work/Mobility

    • The normal working place must be specified, but mobility clauses may be agreed upon. In case of reasonable necessity, an employee can be relocated.

  • Pension Plans

    • Pension Plans are not obligatory but can be provided on a voluntary basis. If an employer provides a pension plan for the greatest part of the employees, all employees have to be given the opportunity to participate (general principle of equal treatment - arbeitsrechtlicher Gleichbehandlungsgrundsatz).

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • A set of rules provide rights such as maternity leave and pay, paternity leave and pay, adoption leave and pay and rights for part-time working. A lot of detailed rules regulate maternity protection such as working conditions and dismissal protection.

  • Compulsory Terms

    • A written statement of terms of employment has to be provided to the employee immediately after the commencement of the employment relationship containing the name and address of both employer and employee, the start date of employment, in case of a fixed term employment the end-date of such an employment, the period of notice, the date of notice, the proposed work place, the vacation entitlement, the employees' salaries scheme classification, the job entitlement, the initial salary received, the extent of annual leave, the working hours and the applicable collective bargaining agreement.

  • Non-Compulsory Terms

    • The parties can agree to any other terms of their choice, provided those terms are no less favourable than statutory rules.


Types Of Agreement

Employment agreements exist in several different forms, such as full-or part-time work, contracts for indefinite period, temporary contracts, contracts for apprenticeship or contracts for production circumstances. Discrimination rules forbid discrimination of part-time or fixed term employees compared to employees with full-time or variable term contracts.

Contracts for indefinite period and temporary contracts:

If the employment contract does not provide otherwise, it will be deemed as having an indefinite term.

Although, Austrian labour law permits employment agreements for a definite period of time, contracts which provide for a longer fixed-term period than a five year term are considered to be concluded for an indefinite period of time. Such employment contracts usually provide for a fixed term and end at the fixed term without notice of termination. Therefore, employment contracts for a definite period of time may only be terminated before such fixed term, if the written employment contract provides for a clause to terminate the agreement by an ordinary termination. In any case, employment contracts for a definite period of time agreed upon a period of longer than five years, can be terminated by the employee within a notice period of six months. However, several consecutive fixed-term employment relationships are considered as a so-called chain of contracts of employment and will be deemed as contracts for an indefinite period of time. Since the conclusion of several consecutive fixed-terms would lead to a detriment for the employee (e.g. regarding vacation, notice periods, severance pay etc), such chain contracts of employment are considered as one contract concluded for an indefinite period of time.

Contracts for Apprenticeship:

Although, there is no general specific form requirement for the contract of employment, an apprenticeship contract in term must always be drawn up in written from. Furthermore, the conclusion of an apprenticeship contract requires the prior consent of their legal representatives. The provisions governing apprenticeships are layed-down in the Education and Training Act (Berufsausbildungsgesetz - BAG). Apprenticeship contracts may only be concluded, if the apprentice has finished his compulsory education (usually with fifteen years of age). In connection with the apprenticeship employment agreement special regulations are applicable on employers. For example, the employer is obligated to provide for professional training. Furthermore, apprenticeship contracts may only be concluded for a definite period of time. Apprentices may in any case never work on Sundays or holidays. Apprentices are entitled to two weekly holidays.

Provisional Contracts for Production Circumstances:

Under Austrian law there are no specific regulations regarding the conclusion of provisional contracts. Up to this point, in case of specific productions circumstances employees have usually been employed on a part time basis or for a definite period of time.

Furthermore, in the case of production circumstances - students or other persons may be employed under a so-called contract for work and services (Werkvertrag). Under such a contract a work has to be provided and a specific successful performance must be guaranteed. In addition, such contracts for works and services may only be concluded, if the individual is not integrated into the principle’s organization, has no obligation to do the work personally and the individual uses his or her own resources.


Secrecy/Confidentiality

There are no statutory rules obliging employees to maintain secrecy, but judicature states that the employee’s duty to maintain secrecy forms a part of the obligation of mutual trust in every employment relationship.

Employment contracts usually contain provisions concerning the employee’s duty to maintain secrecy both during the employment relationship and after its termination. A contractual penalty may be agreed upon in case of breach of secrecy. Contractual penalties agreed upon in employment relationships are mandatory subject to reduction by judgement.

Employers have to observe data privacy rules concerning employee’s data.


Ownership of Inventions/Other Intellectual Property (IP) Rights

According to the statutory provisions of the Patent Act (Patentgesetz), unless the employment contract states otherwise, the employee will be the owner and retain all rights over inventions even if they are developed during the employment. It is permissible to contractually agree that the service inventions belong to the employer.


Pre-Employment Considerations

Basically, there are no inadmissible questions during the job interview. There are only questions that the employee can answer incorrectly without fear of consequences.

In the Austrian labour law, there is no express regulation on the reimbursement of the performance costs.

However, the Supreme Court has ruled that the potential employer will have to cover the cost of the job interview if he specifically asked the job applicant for a personal job interview. The employer can completely or partly avoid his obligation to reimburse the costs by explicitly excluding the applicant's entitlement to the resulting reimbursement of expenses in his invitation to the job interview.


Hiring Non-Nationals

Employers are required to ensure that all employees are entitled to work in Austria. Generally, all citizens of EU member states are entitled to work in Austria.

Employers have to apply for work permits for citizens from non-EU states. Work permits are usually granted for one year but can be renewed each year.

Employers caught employing foreign employees without the necessary permission to work will be liable to pay high penalties. In turn, the employee may lose his or her right of residence in Austria.


Hiring Specified Categories Of Individuals

Special (protective) rules apply to the hiring and employing of apprentices, minors and disabled persons. Furthermore, special (protective) rules apply to the employment of certain groups of employees such as pregnant women. Certain specified (mostly hazardous) jobs are forbidden for these specially protected groups.

Employers with more than 25 employees are obliged to employ at least one disabled person per 25 employees. If the employer fails to do so it will have to pay a penalty (Ausgleichstaxe) . For 2021 this penalty amounts to EUR 271 in the case of 25-99 employees, EUR 381 in the case of 100-399 employees, EUR 404 in the case of 400 and more employees. The penalty has to be paid per month for each disabled person who should have been employed but has not been.

An employer is obliged to make special arrangements for protected employees where necessary.


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

There are specific rules depending on whether in-house or external outsourcing is concerned. If part of the employer’s business – such as book-keeping or an IT-department – is completely outsourced, the employer may be entitled to terminate employment relationships which are usually protected, such as relationships with older employees or members of the works council.

If the outsourcing consists of temporary employment by another employer, specific regulations oblige the employer to apply the same rules and terms regarding salary, workplace and safety rules as required for the person for whom the outsourced employee is working.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

In general, an employer may not vary the contract unless the employee agrees. Employee’s consent may be given expressly or implicitly. A very effective way for an employer to exert pressure on the employee is to use his right to terminate the employment relationship, if the employee does not agree to the change (in other words the employee has a choice between termination of the employment relationship or accepting the revised conditions of employment - Änderungskündigung ).

This mean of pressure only works if the employee is not in a protected class - such as being pregnant, disabled or a member of the works council.


Change In Ownership Of The Business

A change in ownership of the business – or in any part of the business – cannot give rise to any change in conditions of the employment relationship; nor does it entitle the new owner to terminate any employment contract for the reason of the transfer of business alone. All employment relationships are automatically transferred to the new owner. Special rules apply in the case of pension commitments.

Either the old or the new employer has to inform the employees or the works council (if a works council exits) in writing, of the date the ownership changes, the reasons for changing, any legal, economic and social consequences concerning the employees and any measures concerning the employees.

Employees may refuse to transfer. If there is a legal ground for refusal, such as the lapse of a right of continuance according to the relevant collective bargaining agreement or a refusal to take over the pension commitments, the employment relationship remains with the old employer. If the employee refuses to change where there is no legal basis for doing so, the refusal is treated as a resignation of the employee. The employee may not claim damages in this instance.

Generally, the transfer of an enterprise as a whole (in a share transaction, for instance) to a new owner does not affect the existing employment relationships of that enterprise. The enterprise continues to exist as a legal person and remains the contracting party of the employees with all related rights and obligations.

However, in the event of a transfer of the assets of a business or a part thereof, the purchasing third party is deemed to fully enter into all employment relationships attributable to the assets or part thereof being sold as the new employer. The critical question to determine whether a purchaser will be liable for the employment relationships of the seller depends on if a single economic unit exists which continues to exist in its operational entirety after the asset transfer has been affected and whether it is possible to carry on the business activities carried out so far.

Employees who are affected by the business transfer are entitled to object to the transfer of their employment relationship within one month.

The employees have the right to obtain information about the transfer.


Social Security Contributions

Employees in Austria, regardless of their nationality, are covered by mandatory social insurance that consists of pension insurance, accident insurance, health insurance and unemployment insurance. Employers and employees must contribute to the social security system. Employees' contributions are withheld by employers.

Social security contributions are computed as a percentage of gross wage or salary, including certain benefits in kind, up to a ceiling for 2021 of EUR 5,550 a month, plus EUR 11,100 for Holiday pay and Christmas pay. The employer has to pay a percentage of 21.23 for the employee. The rates of contributions by employees are 18.12 %.

The social security contributions are to be calculated by the employer and both the employers’ and the employee’s contributions have to be paid by the employer until the 15th of the following month. For each month and for the whole year special forms are to be filled in and to be sent to the social security authority.


Accidents At Work

Employers are obliged to ensure the safety of their employees.

Employers are also responsible if an accident is caused by an employee acting in the course of his employment. If an employee is injured as a result of an accident at work, the employer will only be liable if the accident was caused by a deliberate act on the part of the employer (in such circumstances, the employer will also be liable for the accident insurance which has to compensate the employee’s claims). If the accident was not caused by an intentional act on the part of the employer, it will not be required to pay any compensation in respect of claims resulting from the employee’s injury.


Discipline And Grievance

In cases where certain grievances are raised, the labour inspector has to be informed. The labour inspector also has the right to enter the workplace without warning. Where a grievance concerning harassment is made, the employer has to provide assistance to the employee and support him or her against other employees if necessary.

Rules concerning discipline are more typical in employment relationships governed by public law, (for example, for magistrates who have tenure).


Harassment/Discrimination/Equal pay

Employees are protected from harassment by law. Harassment mainly means sexual harassment and ranges from displaying pornographic pictures in the workplace to verbal attacks, and from sending e-mails with sexual content to violation of a person’s physical integrity. The rules regarding harassment are directly linked to discrimination.

Employers have to treat employees equally and are not allowed to discriminate employees on grounds of sex, age, sexual orientation, marital status, race, religion or beliefs, disability, part-time status or fixed term status. Unequal treatment is only allowed if legitimated by reasonable grounds.

Equal pay is also directly linked to discrimination and is commonly referred to as “equal pay for equal work.” Despite the existence of such rules, it remains the case that male employees on average earn more than female employees.

An employee who has been discriminated may seek compensation, if the employee is able to prove that the discrimination caused harm. In addition to any damages paid to the employee, an employer found guilty of discrimination may also be ordered to pay a penalty.


Compulsory Training Obligations

There are no compulsory obligations in relation to training, but some employers will require their employees to attend training which is paid for and/or organized by the employer.


Offsetting Earnings

It is possible for an employer to offset sums it is owed by an employee against that employee’s earnings, but only if the employee agrees or does not protest within 14 days of receipt of a statement informing him of the intended set-off, or if the employer already has an enforceable judgement against the employee.


Payments For Maternity And Disability Leave

Employees are entitled to maternity payments. These payments (which are not made by the employer but by the compulsory health insurance fund) are made for a period of 8 weeks before and 8 weeks after childbirth. Payments are calculated on the basis of the average salary of the final 3 months prior to the commencement of maternity protection (which kicks in 8 weeks before childbirth).

An employee can choose to take maternity leave at any time up until the second birthday of the child (in some cases even longer); during maternity leave, the employee is protected against termination of the employment relationship and will receive child allowance which is paid by the health insurance fund. There are two different systems, the income-related childcare allowance and the new childcare allowance account.

The amount payable depends on the duration of maternity leave and on the income before childbirth.

From their first day of sickness absence or disability leave, employees are entitled to receive statutory sick pay. Employees with up to one year of service have a right to be paid for 6 weeks; up to 15 years, payments continue for 8 weeks; from 15 years of service, the period is 10 weeks, and it increases to 12 weeks after 25 years of service. Furthermore, there is an additional right to the payment of half the wage for a further 4 weeks in all cases.


Compulsory Insurance

All employees have to be registered with the compulsory health insurance fund by the employer before the commencement of their employment. All employment related insurance payments have to be made to this fund. The fund then allocates the payments to the other compulsory insurances such as retirement pension insurance, unemployment insurance and accident insurance.


Absence For Military Or Public Service Duties

Employees are entitled to take leave for military or public service duties. An employer may not serve notice on an employee whilst he is undertaking military service.


Works Councils or Trade Unions

Works Council:

According to the Austrian Labour Relations Act (Arbeitsverfassungsgesetz - ArbVG) , a works council may be established, if a business permanently employees at least 5 employees older than 18 years old. Each workplace which forms an organizational unit that operates its own production process or is in another way largely independent from other parts of the undertakings, is considered a business. Usually for white-collar and blue-collar workers a separate works council has to be established. If at least two separate works councils have been established a so-called central works council can be formed (Betriebsausschuss).

Primarily, the works council represents the employee's interests of the work force towards the owner of the business. Furthermore, the works council is integrated into the decision-making process with regard to specific participation rights which are explicitly stated in the Austrian Labour Relations Act (Arbeitsverfassungsgesetz - ArbVG, see further below). It should be noted that if the above-mentioned number of employees is reached the work force may form a works assemble consisting of all employees in order to elect the works council in a secret election. If the work force does not take advantage of this right, the work force forfeits its right to establish such works council.

The number of persons to be elected to the works council depends on the actual number of the employees.

The works council members are elected for the term of five years. The election process is a rather complicated and detailed procedure. The election has to take place in accordance with the principals of proportional representation under the system of d' Hondt. Only employees who are over 18 years old may be elected as a member of the works council. Furthermore, persons who are in some way related to the employer may not be elected.

One of the most remarkable rights of the works council is the participation right in the supervisory board of a stock corporation or a company with limited liability. In detail, if a works council has been established, one third of the members of the supervisory board have to be members of the works council.

Furthermore, the works council has a great variety of participation rights. In general, the works council is entitled to supervise compliance with the laws regarding employees and has the right to participate and to obtain information. For this purpose, the works council may review all remuneration salary records and all documents kept for the purposes of salary computation, check compliance with collective bargain agreements and shop agreements, and supervise if safety and health provisions are complied with. Therefore, the works council may also inspect and review all personal files of the employees. In general, the works council has a comprehensive right to obtain information and to intervene with the employer as well as with other competent authorities to the interest of the employees. The works council may furthermore participate in the management of in-house training, educational and welfare facilities.

The following participation rights are of utmost importance:

  • The employer is obliged to consult with the works council of any important matter with regard to interests of the employees.
  • Before employing one individual, the works council has to be informed in detail, though, the works council is not entitled to take part in the decision-making process.
  • The works council must be informed in cases of promotion.
  • Any assignment to another job for a long time (more than thirteen weeks) which may have a negative impact on working conditions (e.g. salary, type of force) needs approval of the works council.
  • The works council must be informed before termination of an employee.
  • Disciplinary measures require in any case the prior approval by the works council.

Trade Union:

Employees may voluntarily become a member of a trade union. Members of trade unions are not as protected as members of a works council but still have certain rights against their employer. An employee may not be dismissed solely on the ground for membership in a trade union or for taking part in trade union activities.

Trade unions are allowed to represent their members in the first and second instance of labour court proceedings (but not at the supreme court).
Employees’ Right To Strike

There is no explicit general right for employees to strike but such a right is derived from the Austrian Federal Constitution.
Employees On Strike

An employer can generally dismiss employees on strike. An employer can also take other actions such as withholding pay of employees on strike. Where this happens, the trade union will usually take over the payment of wages to those employees on strike.
Employers’ Responsibility For Actions Of Their Employees

In general, employers are responsible for their employees’ actions according to the Civil Code. An exception is made where the employee acts outside the course of his employment. In the event that the employee is guilty of gross negligence or takes deliberate action, the employer has the right to claim against the employee.

4

FIRING THE EMPLOYEE

Austrian labour law provides three possibilities of termination of employment by the employer:

  • (ordinary) termination by providing notice (Arbeitgeber-Kündigung)
  • mutual termination (einvernehmliche Auflösung)
  • dismissal (immediate termination for cause without notice period – Entlassung)

An important distinction in terms of the termination possibilities must be made between employments of indefinite duration and fixed-term employments . While employments of indefinite duration can be terminated in all three available forms, fixed-term employment contracts can be terminated prematurely only by consent or by dismissal for good cause (unless provided differently in the individual employment contract). A fixed-term contract ends automatically through expiration of the term at the date fixed in the employment contract. If the employee continues to work beyond the date on which the contract is to end with the employer's consent and if a new term is not agreed, the contract of employment becomes one of indefinite duration. It is therefore very important to monitor the termination date of fixed-term employments and send a written notice that services are not requested by the employer beyond that date, if the relationship is to be discontinued.

Special rules exist with respect to termination during a validly agreed upon trial period. During the trial period, either party can terminate the employment without cause and without observing any special periods or dates of notice. Such trial periods can, however, only be validly agreed upon for periods not exceeding one month.

Procedures For Terminating the Agreement

Where 5 or more employees are to be dismissed within one month, the regional employment bureau has to be informed at least 30 days before notice is given (Kündigungsfrühwarnsystem) .

If a works council exists, it has to be informed before any termination and can give an opinion within one week. If the works council disagrees with the termination or does not give an opinion, either the works council or the affected employee can appeal against the termination at the Labour and Social Court. If the works council agrees, only the affected employee can appeal against the termination. An appeal against termination is only possible for certain reasons (for example if the termination of the employment contract is not in accordance with the social employment rules concerning elder employees).


Dismissal

An employer can terminate the employment relationship by dismissal where there are serious grounds, such as misappropriation, corruption, incapability, competing against the employer or violence against the employer, his relatives or other employees.

The employee can appeal against such a dismissal at the Labour and Social Court. Even if the employee succeeds with his appeal, the employment relationship is still terminated. However, in that case the employer will be required to pay the amount it would have had to pay when acting in compliance with the appropriate notice period.

The Employment Act contains specific provisions on immediate termination. Section 26 of the Employment Act provides that the employee is entitled to immediately terminate the employment particularly in the following instances:

  • if the employee becomes physically (or mentally) incapable of continuing work or cannot continue his service without damaging his health;
  • if the employer does not pay its salary properly or violates other essential obligations of the employment contract;
  • if the employer does not comply with its occupational safety and health obligations; or
  • if the employer commits an act of violence, an immoral act, or makes severe insults against the employee or his relatives, or the employer does not protect the employee against such acts committed by other employees or relatives of the employer.

Conversely, the employer may immediately terminate the employment particularly if the employee is guilty of gross misconduct (Section 27 of the Employment Act):


Employee's Resignation

The employee can generally always resign, assuming the contract is not for a fixed term. The employee has to comply with any legal and contractual notice when resigning. According to the Employment Act (Angestelltengesetz – AngG) employment agreements may only be terminated by the employee at the end of each month under observing a notice period of one month (otherwise agreeable).


Termination On Notice

Ordinary termination usually does not require any cause but is regularly subject to notice periods that depend on the length of the employment. Both employer and employee can terminate the employment relationship on notice. According to the Employment Act (Angestelltengesetz – AngG) minimum periods of notice and termination dates have to be observed. Statutory minimum periods of notice override contractual notice periods. The minimum period of notice depends on the duration of the employment relationship and increases with the length of the relationship.

According to the Employment Act employment agreements may only be terminated by the employer at the end of each quarter. However, the parties can agree that the termination date may also be the 15th, or the last day of each month.

According to the Employment Act (Angestelltengesetz - AngG) , the employer must respect the statutory notice periods in case of termination of white-collar employees from 6 weeks up to 5 months, depending on the years of service.

According to the statute, the employment can only be terminated effective at the end of each calendar quarter. This rule can be changed by individual agreement so that the employment may be terminated effective as of the 15th, or at the end of each calendar month.

Notice does require acknowledgment of receipt but is not requiring the consent of the employee. Furthermore, notice does not - except in the case of termination of employees enjoying special protection from termination - have to be made in writing. For evidentiary purposes it is however advisable to do so. In this case, the notice must be signed on behalf of the employer by the correct number of authorized representatives.

Please note that in plants in which at least five employees are regularly employed, and a works council has been established, all employees are entitled to some protection against ordinary termination. The employer must first notify the works council of the intended termination. The works council may then comment on the termination within one week. After that period the employer may proceed with the termination. A violation of the pre-notification requirement makes any termination void.


Termination By Reason Of The Employee's Age

An employer can terminate the employment relationship if the employee reaches the retirement age. However, the employee can fight against this termination before court. Generally, this appeal won’t be successful if the employee is already entitled to the statutory pension.

To succeed, the employee has to prove that he is not able to find new employment (with a comparable salary) within 12 to 14 months of termination, and that he depends on employment. If the employee can prove this, the employer has to prove that notice was given either for good reasons in the employee’s sphere (for example because the employee is not able to do his work any more) or for good reasons in the employer’s sphere (for example, the closure of the part of the business in which the employee was employed or because of an economic need to restructure).


Automatic Termination In Cases Of Force Majeure

Automatic termination in cases of force majeure only applies if continuation of the employment relationship is impossible. However, this is extremely rare.


Collective Dismissals

The employer must inform the competent employment office in writing if the number of employees is to be reduced within 4 weeks by at least 5% in an establishment with at least 100 employees, and by at least 50 employees in an establishment with at least 1,000 employees. If the employer gives notice without having previously notified the employment office, the notice given is null and void (Kündigungsfrühwarnsystem).


Termination By Parties’ Agreement

Employment Agreements may be terminated by mutual consent between employee and employer at any time (Einvernehmliche Auflösung) . The parties are free to agree to terminate the employment relationship on any grounds and subject to whatever conditions they desire. Mutual termination does not have to be made in writing. Anyhow, it is advisable to establish a specific agreement regulating all conditions of the termination of the agreement (end date, vacation, severance pay etc).


Directors Or Other Senior Officers

There are no special rules regarding the termination of a director’s or other senior officer’s employment, but in the case of a statutory director (or other company officer), termination of employment does not automatically end the directorship. Separate steps will be required to bring the directorship to an end (pursuant to the company’s articles of association).


Special Rules For Categories Of Employee

Aside from compliance with the general provisions, the employer has to take into account whether the employee to whom notice of termination shall be given is subject to special protection against termination under applicable laws.

Persons enjoying special protection are, in particular, (a) apprentices, (b) expectant mothers, (c) mothers or fathers on parental leave, (d) persons doing military service or community service in lieu of military service, (e) members of the works council (f) members of the youth representative council, (g) disabled persons and (h) representatives of disabled employees.

These persons can effectively be terminated only on the grounds, in the manner and subject to the procedure laid down by law.

  • Members of the works council may be subject to ordinary termination by providing notice only with the consent of the competent Labour Court. The court may grant an action brought by the employer for notice to a member of the works council only if the business or parts of the business will be shut down and if the member can no longer be employed, in case of incapacity of the member, making it unreasonable for the employer to continue the employment, or in case of persistent breach of duty, making it unreasonable for the employer to continue the employment for disciplinary reasons. Similar rules are in place for members of the youth representative council and representatives of disabled employees.
  • Notice to a disabled person with special privileges (requires a 50 % disability and fulfillment certain aspects regarding nationality or status) can effectively be given only with the prior consent of the Disabled Persons Committee (Behindertenausschuss) .
  • Unilateral termination of apprenticeship contracts by the employer requires the written form and is possible only on the grounds laid down by law. Lawful grounds of termination would be, for example, any criminal conduct of the apprentice or any physical or a (substantial) verbal insult against the employer or persons close to him, neglect or breach of statutory or contractual duties despite repeated warnings.

Specific Rules For Companies in Financial Difficulties

If an employer gets into financial difficulties and is not able to pay wages on the due date, the employees may instantly resign and may claim for damages.

There are specific rules for insolvent companies. Where insolvency proceedings have commenced, the receiver takes over running of the business. Employment agreements are not terminated automatically but have to be terminated by the receiver under the usual conditions as described above.

If a company or the assets of a company are sold during insolvency proceedings, rules concerning transfer of the employees from one employer to another as described above do not apply and employees do not have to be adopted by the new owner of the business.


Restricting Future Activities

Non-competition clauses are legally binding, if certain conditions are met. Such clauses are void if the employee was a minor when the clause was agreed upon and/or if the employee’s earnings for the last month of the employment agreement do not exceed a certain amount (currently EUR 3.700,-- gross for 2021 in case of agreement after December 29th 2015; before that date EUR 3.145,-- gross for 2021). The restriction must not last for more than one year, the clause has to define a limited geographical scope and it must not significantly hamper the employee’s ability to find new employment.

Usually the parties will agree on a contractual penalty payable in the event the employee breaches the non-competition clause. This penalty is subject to mitigation by the Labour and Social Court, which may not be excluded by contractual agreement. However, in case of a contractual penalty, the employer has not the right to insist on compliance with the post-contractual non-competition clause.


Whistleblower Laws

The duty of good faith (Treuepflicht) generally requires employees to notify the employer about any imminent danger that could cause severe damage to the employer. This general duty, however, does not comprise any further obligation to report misbehavior or breaches of duty of other associates unless specifically implemented.

More comprehensive notification or reporting duties can be implemented either by a shop agreement (Betriebsvereinbarung), by way of a directive of the management (Weisung) or on an individual contractual basis.

While in most cases the consent of the works council and, thus, the execution of a shop agreement will be required for the implementation of the (technical) reporting systems, there is no requirement to enter into such shop agreement for the imposition of the mere obligation to report misconduct on employees. Consequently, a (unilateral) directive issued by the management would suffice to commit all employees to report misconduct.

According to Sec 96 para 1 subpara 3 ArbVG, the implementation of technical systems and other means for monitoring associates which have an impact on human dignity require execution of a specific shop agreement.

The impact on human dignity by the whistleblowing system lies in the possibility for associates to report on misconduct anonymously. Employees may accuse colleagues without disclosing their own identity. Moreover, data can be collected both on the whistle-blower him/herself and on the person who is reported. This way of reporting misconduct is considered an impact on human dignity according to Sec 96 para 1 subpara 3 ArbVG. It is essential to conclude a shop agreement with the works council pursuant to Sec 96 para 1 subpara 3 ArbVG, as otherwise the installation of a whistleblowing-system (whistleblowing hotline) would not be permitted under Austrian law.

The use of a whistleblowing hotline, which has been installed without the consent of the works council, violates Austrian labour law. Employees may hold the employer responsible for all damages resulting from the unlawful use of the whistleblowing hotline.


Special Rules For Garden Leave

Employers can send employees on garden leave whenever they want to do so. However, the employees on garden leave are entitled to continuous payment of the salary and are not obliged to consume their vacation days.


Severance Payments

Severance pay means an extra ordinary remuneration paid upon termination of employment. It is a form of "loyalty bonus" with the amount thereof depending on the duration of service.

The old severance payment regime (Abfertigung Alt) applied to all employment contracts which have been entered into before 1 January 2003, while the new regime (Abfertigung Neu) applies to all employment contracts entered into from 1 January 2003 onwards.

Old Regime (Abfertigung Alt)

Under the old regime, employees are entitled to severance payment in case of (i) termination of the employment by the employer, (ii) termination of the employment by the employee for good reason, (iii) mutual termination or (iv) unjustified dismissal. The amount of the severance payment depends on the duration of the employment and is calculated pursuant to Sec 23 Employment Act (Angestelltengesetz) which regulates a severance pay up to 12 months´ pay.

The severance payment is a direct payment obligation of the employer towards the employee. In case the amount of the severance payment exceeds three monthly salaries, such amount equaling three months salaries is due together with the monthly salary for the last month of service of the respective employee while the remaining amount exceeding this threshold may be paid in subsequent monthly instalments.

New Regime (Abfertigung Neu)

Under the new regime the employer pays monthly contributions in the amount of 1.53% of the monthly gross salary of the employee(s) into a specific state-owned employee provisions fund (Mitarbeitervorsorgekasse). Under the new regime employees are entitled to severance payment in case of termination irrespective of the reason for the termination and irrespective of whether the employment was terminated by the employer or the employee.

The severance payment is made out of the state-owned fund; there is no payment obligation of the employer towards the employee(s) upon termination with respect to severance payments.

If the employee themselves terminates the employment agreement or decides to leave the paid-in amount in the fund, they keep it and takes it with them to their new employer. If not withdrawn earlier, the paid-in amount is eventually paid out when the employee retires.


Special Tax Provisions And Severance Payments

Statutory severance payments are taxed at only 6%. If the parties agreed on additional severance payments on a contractual basis, these payments are subject to normal income tax.


Allowances Payable To Employees After Termination

Employers are not required to contribute to any allowances payable to employees after termination, as employers already contributed during the employment agreement through payment of unemployment insurance.


Time Limits For Claims Following Termination

The general limitation period of 3 years applies to claims arising from an employment agreement. Some collective and individual contracts shorten this period. However, according to judicature, the time limit cannot be reduced to less than three months.

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

In addition to the usual monthly payment of salary, all employees receive 2 additional payments every year, each equivalent to one month’s earnings (in general one additional payment is received in June and the other in November). Both additional payments are subject to preferential taxation - the first 620 euros are not taxed, the following 24,380 are taxed at 6% and then the tax increases according to a sliding scale.



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Contact a Contributing Author:
Dr. Christoph Wildmoser
Herbst Kinsky Rechtsanwälte GmbH
Austria


Dr. Wolfgang Schwackhöfer
Herbst Kinsky Rechtsanwälte GmbH
Austria


Disclaimer:

© 2021, Herbst Kinsky Rechtsanwälte GmbH. All rights reserved by Herbst Kinsky Rechtsanwälte GmbH as author and the owner of the copyright in this chapter. Herbst Kinsky Rechtsanwälte GmbH has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021